Manulife Financial (MFC.TO)

He likes this company. There was a run up last year on the anticipation of higher interest rates and inflation coming back. That didn’t happen, so the stock has calmed down. Earnings are being reported, and they are good and solid. ROE of about 11%-12%. He likes this longer-term, because it is capital market intensive as well as their growth in Asia.

Canadian Banks versus lifecos? He is a bigger fan of the lifecos. Manulife (MFC-T) and Sun Life (SLF-T) are going to get a big boost from rising interest rates. It is already starting to happen. The yield curve is steepening. Lifecos have been suffering and living with low interest rates for a long time. Both companies are also quite global. They have big presences in the US and in Asia. He sees a better earnings growth over the next few years.

They reported a good number as well as really good growth in Asia. This is down because of the macro environment since they reported. Both banks and lifecos are down. They will also be a beneficiary of higher rates. Expects it will be around $26.01 year out. It would be a Buy under $24.

GWO-T vs. MFC-T. MFC-T has the advantage of being a very diversified company, globally. They have done well from that diversification. He tends to prefer it to GWO-T, although he might use its weakness to buy.

Move into banks instead? He likes the banks more. This company’s story on paper is pretty good. They’ve gone from being insurance centric to wealth management, which has that reoccurring fees. They’ve done a lot of things well. Interest rates are eventually going to go up, and this company is going to benefit. However, if you are not making money for your shareholders, it is a waste of time. He would make that move.

Bought this for his equity platform on its break-out in late 2016, and sold it in the early part of this year. He still holds it in his income platform because it has a pretty darn good dividend. Doesn’t think there is a lot of downside. If you are happy holding the stock and collecting the dividend, there is going to be a fair amount of support at around $22, and he wouldn’t worry about it.

He likes the life insurance business in Canada, but this is his least preferred. He prefers GWL-T or SLF-T. He is looking for interest rates to eventually go up.

This seems to be the favoured insurance company right now. The business needs interest rates to pick up. They also need their Asian and US businesses to pick up. You may see flows Canadian banks into this insurance company.

(A Top Pick Feb 22/16. Up 42.7%.) He still likes this. Looking out longer-term, it is very much a favourite. China is going great guns and North America is getting better. He can see another $4-$5 a share in the next 12 months.

(A Top Pick May 4/16. Up 34%.) He chose this for its Asian growth, its US currency exposure and for wealth management tailwinds. It was really cheap at the time. He still models good EPS and good dividend growth from here.

All the financials had a big, big move, and this was probably one of the greatest recipients of this bump in Canada. In terms of an overall stock, their valuation is reasonable. It looks like they are putting some improvements in place with the John Hancock business, which has been a huge headache. ROE is still lower than its competitors. (See Top Picks.)

Insurance companies have been predicated upon interest rates going up in the next little while. They’ve made a lot of money on investment sales in the last couple of quarters, and he thinks that is going to be pulling back a little. One of the keys is their Asian business. They have a very strong and developing emerging markets/Asian business, which is what you want to own the stock for over the long-term.

She likes this. All insurance companies will benefit from a rising interest rate environment. In the last few weeks, most insurers and financials have been in a trading zone because there is a question of how fast rates are going to increase, both in the US and Canada. This has good exposure in the US, so will benefit from rising rates. She also likes their positioning in Asia. About 25% of revenues comes from Asia, and it is a faster growth market. Trading at a discount to Sun Life (SLF-T), but going forward that gap is closing because their ROE is growing at a faster pace. They’ve been increasing dividends, and she sees that continuing. Could see this in the high $20 area.

(A Top Pick Oct 26/16. Up 21%.) He sold out of this at around $24.67, and repurchased it again in the last few weeks. This was a play on rising interest rates. He could see this moving into the high $26-$27.

He prefers SLF-T. There should be a pretty good opportunity here to benefit from growth in Asia and in their wealth management businesses. MFC-T lost money on their hedges. Over time they should normalize.